Analysis of SEBI & BSE Circulars for Listed Entities – June 2023

Explore the latest regulatory updates for listed entities from SEBI and BSE in June 2023. From cracking down on insider trading to improving transparency, understand the comprehensive guidelines, new frameworks, and streamlined compliance procedures for a stronger and more efficient stock market.

Over the past month, the Bombay Stock Exchange (BSE) and the Securities and Exchange Board of India (SEBI) have released various regulatory updates. These cover multiple aspects of the stock market, including equity, debt, operational policy matters, and more.

Comprehensive Guidelines: BSE’s Master Circulars

On June 14, 2023, BSE released Master Circulars relating to various segments, including Equity, Debt, and other operational and policy matters. These circulars serve as a consolidation of all previous circulars issued by BSE. By condensing this information into Master Circulars, BSE aims to simplify and streamline the understanding of its policies and regulations for all stakeholders. You can read the complete circular here.

Cracking Down on Insider Trading: SEBI’s PIT Regulations

In a bid to curb insider trading, SEBI introduced a new framework under the SEBI (Prohibition of Insider Trading) Regulations, 2015. The framework, dated June 28, 2023, aims to restrict trading by Designated Persons (DPs) by freezing their PAN at the security level.

To ensure a smooth implementation of these restrictions, SEBI has issued a schedule, which outlines that this framework will be applicable to all listed entities from QE March 31, 2024. This measure is expected to bring more transparency and fairness to market operations.

Summary:

• SEBI via circular dated 5 August 2022 intended to freeze the PAN of designated persons, thereby restricting them from trading during the TWC Period.
• BSE via this circular issues a schedule for implementing the process of restricting trading by Designated Persons by freezing their PAN at security level, which is as follows –
• For the implementation of the framework of freezing PANS from QE September 30th 2023 – List of companies will be shortlisted and shared in a separate circular by July 21, 2023.
• For the implementation of the framework of freezing PANS  from QE December  31st  2023 – List of additional companies will be shortlisted and  shared in a separate circular by October  20, 2023
• For the implementation of the framework of freezing PANS from QE December  31st  2023 – List of additional companies will be shortlisted and  shared in a separate circular by October  20, 2023
• The said framework will be applicable to all listed entities from QE March 31st 2024.
• The system must be implemented in compliance with the procedure as elaborated in the SEBI circular dated August 5th 2022.

The complete circular is available here.

Streamlining Schemes and Disclosures: SEBI’s Master Circulars

On June 20 and 21, 2023, SEBI issued two vital Master Circulars. The first focuses on the Scheme of Arrangement by Listed Entities, and the second delves into the Issue of Capital and Disclosure Requirements 2018. Both circulars are aimed at making regulatory compliance easier for market participants by bringing all relevant information under one roof. The circulars have been issued with prospective effect, which means they will apply to situations arising after their issuance. Access the circulars  –

Links: 

SEBI Master Circular: Scheme of Arrangement by Listed Entities & Relaxation Rules

Improving Transparency: SEBI’s Second Amendment to LODR Regulations

The SEBI Listing Obligations and Disclosure Requirements (LODR) (Second Amendment) Regulations, 2023, coming into effect from July 14, 2023, mark a significant step towards enhancing transparency among listed entities.

This amendment addresses a wide array of subjects such as introducing the definition of ‘Mainstream Media’, prescribing a timeline for filling up vacant Compliance Officer Positions, and introducing mandatory quarterly disclosure of details of cyber security incidents. It also presents guidelines on the disclosure of agreements among stakeholders, requirements for financial results disclosure post-IPO, and specific timelines for the disclosure of material events to the stock exchange.

This amendment promises to bring more transparency to market operations and strengthen the regulatory framework surrounding listed entities.

Summary:

• These regulations, effective from July 14, 2023, bring several noteworthy changes for listed entities.
• The amendment introduces the definition of ‘Mainstream Media’. This term includes newspapers registered with the Registrar of Newspapers for India, news channels permitted by the Ministry of I&B under the Government of India, and content published under the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. It also covers similarly registered or permitted news platforms in jurisdictions outside India.
• The amendment also prescribes a timeframe for filling up vacant Compliance Officer Positions— within three months from the date of such vacancy. Similarly, vacancies of MD, CEO, CFO, and other Key Managerial Personnel (KMPs) must be filled within three months from the date of the vacancy.
• Regulations 16 -27 of SEBI LODR 2015 will not be legally binding on high-value debt listed entities until March 31, 2024. Such entities must either comply with these regulations or explain the reasons for non-compliance. Post this date, compliance becomes mandatory.
• From April 1, 2024, the permanence of a director’s seat on a listed company’s board will end. A director’s continuation on the board will be subject to shareholders’ approval at a general meeting at least once in every five years. However, this provision will not apply to directors appointed through court orders, lending arrangements by RBI-regulated financial institutions, or under subscription agreements for debentures issued by the listed entity.
• The amendment introduces mandatory quarterly disclosure of details of cyber security incidents/breaches or data loss in the Corporate Governance Report. It also introduces quantitative thresholds for determining the materiality of events in Regulation 30. An event is considered material if its value exceeds the lower of: 2% of turnover or net worth, as per the last audited consolidated financial statements, or 5% of the average of absolute value of profit or loss after tax, as per the last three audited consolidated financial statements.
• Events impacting the listed entity, occurring before the notification of these amendments, must also be disclosed to the stock exchange as a material event within 30 days.
• The amendment also dictates specific timelines for the disclosure of material events to the stock exchange. These depend on the nature of the event and whether it originates within the listed entity. Furthermore, top 100 listed entities by market capitalization are required to verify and confirm or deny market rumours from October 1, 2023, and top 250 entities from April 1, 2024.
• The amendment requires the disclosure of agreements among shareholders, promoters, promoter group entities, related parties, directors, KMP, employees of the listed entity or its holding/subsidiary/associate company, to the stock exchange. Any special rights granted to shareholders shall be subject to approval in a general meeting by a special resolution once every five years.
• The amendment requires a listed entity to submit its financial results for the quarter/financial year succeeding the period disclosed in the offer document for the IPO. Additionally, it must submit a certificate regarding the status of payment of interest/dividend or repayment/redemption of principal of non-convertible securities within one working day of it becoming due.
• In case of resignation of KMP, senior management, Compliance Officer/director other than an independent director, the letter of resignation, along with detailed reasons, should be disclosed to the stock exchange within seven days from the effective date.

Read the full amendment here.

Streamlining Compliance: BSE’s XBRL Mode for Filing of ASCR

On June 14, 2023, BSE introduced a facility for filing the Annual Secretarial Compliance Report (ASCR) under Regulation 24A of SEBI LODR in XBRL Mode. This move is set to streamline the submission process, making it more efficient and user-friendly.

The facility for filing of ASCR under Regulation 24A of SEBI LODR in XBRL Mode was made available with effect from June 15, 2023. The due date of submission for the financial year ending March 31, 2023, was June 30, 2023. This new initiative is expected to make the process of compliance reporting smoother and more standardized for all market participants. Get more details here.

The recent circulars by BSE and SEBI indicate a proactive approach towards refining the operational and regulatory aspects of the Indian stock market. It’s clear that the focus is on improving transparency, ensuring stricter compliance, and making the system more efficient for all participants.